Decision making and pensions
A programme of research funded by the Pensions Authority examines comprehension of pensions and the effect on decision making.
A first study tested the use of graphics in pension benefit statements. It found that graphics had only a marginal impact on comprehension of products but nevertheless made people more inclined to increase pension contributions. The paper can be found here.
A second study shows that people’s preference for taking their pension as an annuity rather than a lump sum can be strongly influenced by how the decision is framed. Results are here.
A third study conducted a series of experiments to investigate biases in people’s perceptions of money growth over decades of saving. The studies show that people dramatically underestimate how money in a pension accumulates. Results are available here.